Working Paper

Public policy in support of small business: the American experience


Abstract: Information problems in small enterprise credit markets can result in a market equilibrium characterized by credit rationing. These information problems are potentially more severe during sharp economic downturns such as the recent Great Recession. Government interventions to alleviate credit constraints on small firms need to be designed to correct the specific market failure resulting in socially suboptimal credit flows. We argue that Small Business Administration loan guarantees are a potentially appropriate intervention and provide a review of empirical research that supports our contention.

Keywords: Small business - Finance; Small Business Administration; Financial markets;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers (Old Series)

Publication Date: 2011

Number: 1116